Update: EUR/USD and NZD/USD

Hi readers,

Ok let's see how things have been moving since the last entries were made.

EUR/USD short position:

At this point the trade is only slightly into the positives, back up a little from yesterday.



My concern right now is the look of the two latest daily candles right at the end. They are both "inside days" which according to "candlestick"-analysis indicates a short-term trend change (ie. change against my short position). (For more info on inside days and candlestick reversals check-out this link: href="http://www.investopedia.com/articles/technical/03/020503.asp">) This puts me in a tough spot. The HS break downward tells me the price is moving lower, the inside day candle pattern tells me otherwise.

This gives me three options:
1 - I find that am neutral to the currency pair and close the position at a minimal gain
2 - I change my mind and reverse the position
3 - I hold onto the position

In general in this case I think it would be wise to hold onto this position. This is because the HS-formation has a technical indication with a much longer time frame than the inside day bullish signal. However, I am still going to move down the stop loss to make the loss minimal incase things go wrong. If I change to the 4-hour perspective, there is a top at 1.4452. Therefore I will move the stop down to 1.4460 and risk at most a 30 pip loss. This would mean that if the market acts on the short term candlestick pattern, I will get out of the trade. If that does happen there is always the possibility that I will get back in on the short side if the price goes back down.



NZD/JPY short position:

Not much has happened here since I entered the trade. The price was somewhat lower yesterday but is at about breakeven for me at this time. Lasts days candle doesn't reveal much other than that it is a halt in the drop from the upper trendline. We will have to wait and see what happens here.




I will get back to you soon

/H

NZD/JPY downwards trendline bounce

Good Afternoon readers!

Today at around lunchtime (about 1 hour ago) I entered a short trade in NZD/JPY. This was due to a bounce at an upper trendline (ie. resistance) which will now hopefully force the price down.

Observe the following chart:


The black line indicates the downwards pointing trendline that the price has hit and started moving away from. That is the basis for this TA. The main supporting indicaor is in this case the stochastics indicator which seems to me to be pretty consecutive in indicating trendline bounces. Just like at the two prior peaks the stochastics has moved above and then back below the 80 value which indicates a downturn, especially when coupled with a trendline hit and a short-term downwards trend.

Also the price just crossed below both the 200 and 50 moving averages, both considered strong supports.

The only indicator going against this prediction is the MACD. As you can see it has broken its trendline and has reached a higher peak than the previous one, which should indicate a strengthening price. I however decided that the reliability of the stochastics is stronger in this case.

I entered this trade at 85.67 and placed a stop-loss right above 87.20 (the latest pivot point). This is quite a big stop but the NZD/JPY is pretty volatile so it needs to be. Since the setup is akin to a downwards sloping channel, I will make my price target right below the latest dip, right above 80.00.

Like always I will follow up with regular updates and more trades.

A quick update on the other active EUR/USD trade perhaps? Well so far it has been moving in the right direction although it has been very volatile. The trade is about 40 pips in the positives right now, but it changes every second so I will be back tomorrow for another update.

Good trading,

/H

Back with EUR/USD

Hello readers!

School has been very busy lately and that's why I left this blog in hibernation for about a month. Now however, I am back with a EUR/USD trade. The USD has been going downhill for a long time now, but now I am entering a short position in EUR/USD based on the following technical analysis.





If you know the basics of TA you can probably see what I am getting at. The EUR/USD has completed and broken down through a Head and Shoulders formation. The first top is around November 7th followed by the first neckline dip, then follows the head-section all the way until the December 6th neckline dip, then the formation is completed with the last shoulder and finally the break of the neckline last friday.

What a downside break of a HS formation is supposed to indicate is that a long-term trend has come to an end and changed direction. This breaks one pretty basic TA rule which is that following the prevailing trend is a good thing, (the trend is your friend), and I believe this to be true. But a HS-formation is supposed to indicate a situation where an exception should be made. Also that a trend change occurs for technical reasons at this point makes sense because the price action reached a symbolic level of $1.5 per EUR (and symbolic numbers matter more than you might think). The price stopped just short of that point and has gone downhill since, this makes me believe more firmly in a trend change.

Aside from there just being a HS formation, there is also MACD support of a negative break. The first shoulder and head are at the top of the MACD scale but for the last shoulder the MACD-lines have tumbled down in divergence to the market price. This indicates a technical weakness in the price action which is also an indication of future falling prices.

Also the price has broken through the 50-day moving average which is considered to be a pretty strong support, and the bollinger-bands have "opened-up" from a horizontal consolidation which indicates that a strong movement is coming.

This trade could have been entered on friday, but I was unable to access the market and didn't have the opportunity, also I am not always so keen on entering trades on friday afternoons. I entered this trade just minutes ago at the first asian action at a market price of 1.4432. I put the stop right above the neckline (around 1.4540). It is possible that the price comes back up to test the neckline which does happen a lot when a trend turnarounds appear. The stop is pretty big (100+ pips) and perhaps not really optimal, but when you enter a trade on the basis that a trend is changing, you need to look at things in a longer term, meaning that you use a bigger than usual stop-loss level and a longer holding period.

One must not forget to have a time or price goal for exiting the trade, and for the moment I am going to say that the price might move 450 pips from the neckline break (derived from the height of the formation) and that will be my preliminary goal.


There you have it, I will return with updates on this and hopefully other trades in the nearby future!

/H